ICIEC Strategies for a Dynamic Sustainable Future
Well-Positioned to Consolidate Intra-OIC Trade and FDI Flows in Support of South-South Relations, UN SDGs, and Energy Transition
ICIEC, as part of the IsDB Group, is well-positioned to adapt to the changing global trade, finance, investment, and risk mitigation environment. Its focus on supporting trade within the member states of the Organization of Islamic Cooperation (OIC) aligns with the increasing importance of South-South trade. ICIEC can continue to play a vital role in promoting economic development for its member countries by facilitating trade flows and supporting foreign direct investments. Khosro Rashid, Associate Manager, Underwriting Operations Department at ICIEC, considers the Corporation’s performance/achievements in credit and investment insurance in FY 2023, and ponders the prospects for 2024 and beyond, and how the Corporation is dealing with the ever-emerging developments in trade and finance taxonomies, regulations, sector challenges, trade digitization and the new ISO 20022 standard for trade finance and insurance messaging in transactions.
ICIEC in 2023 – a Year of Impressive Growth
In 2023, ICIEC’s Business Insured (BI) reached USD13.3 billion representing 14.66% yearon-year growth from the previous year. New Insurance commitments reached USD4.2 billion and Total Gross Written Premium totaled USD108 million.
Since its inception in 1994, ICIEC has insured USD108.3 billion in trade and investment across the globe for its 49 Member States, including USD86.2 billion in export credit and USD22.1 billion in investment insurance. We have been a champion of intra-OIC business, supporting USD51 billion in trade and investment within OIC countries.
To sustain the impressive growth experienced since 2015, the Board of Governors unanimously approved the 3rd General Capital Increase (GCI) during its 29th Annual Meeting on June 4, 2022, in Egypt.
Throughout 2023, substantial support was garnered from our member states, and we are pleased to announce that most shareholder member states have duly confirmed their subscriptions while the rest are in process (please refer to ICIEC’s 2023 Annual Report for further details).
The capital increase enhances ICIEC’s financial strength, boosts its loss-bearing equity resources, improves internal capital generation capacity, helps to continue its operation on a solid and stable foundation, and strengthens its credit fundamentals.
In addition, the Board of Governors approved a Special Share Class comprising 20% of the increase in Subscribed Capital (ID100m) for subscription by financial institutions owned/ controlled by Member States.
Outlook for 2024 and Beyond
We remain committed to expanding our impact and integrating climate action and food security for the benefit of our Member States. We will continue to engage with stakeholders to identify challenges and devise bespoke insurance solutions.
During COP28 in Dubai, ICIEC launched its Climate Change Policy and ESG Framework, reaffirming ICIEC’s policy thrust in promoting sustainable development and resilience in the face of climate challenges.
Additionally, the IsDB and ICIEC joined the Energy Transition Accelerator Financing Platform (ETAF), managed by The International Renewable Energy Agency (IRENA), positioning ourselves as a key player in climate action initiatives.
Development Areas of ICIEC in 2024 and Beyond
| Development Area | Description |
|---|---|
| Underwriting | Soon-to-be-live ICIEC Takaful System (ITS) |
| Financials | Implementation of IFRS 17 and 9 (reserving) |
| Enterprise Risk Management | Stress Test and Risk Based Pricing Framework to be implemented in addition to establishment of Sustainability Risk practices |
| Business | Becoming an insurance facilitator and broker of choice |
| Member Country | Recent concerted efforts to advance ICIEC services in CIS countries |
| Credit Intelligence | OBIC for providing credit intelligence for OK stakeholders |
| Risk Assessment | Acclimatize for advance climate risk assessment |
| IsDB Group Synergy | Bank Master Policy (BMP) for increased cooperation between sister entities in IsDB Group |
Source: ICIEC Annual Report 2023
Navigating the Evolving Landscape Credit Insurance and Foreign Investment Insurance in a Changing World
The trade and finance landscape are undergoing a dynamic transformation. New technologies, evolving regulations, and emerging sector challenges necessitate that credit and investment insurers such as the Islamic Corporation for the Insurance of Export Credits (ICIEC), the unique Shariah-based multilateral insurer of the Islamic Development Bank (IsDB) Group, adapt their strategies to remain relevant and effective.
The key developments impacting the industry and proposed strategies for credit and foreign investment insurance companies to navigate this evolving environment include:
1.Trade and Finance Taxonomies and Regulations – Keeping Up with the Flow
- Standardization: Classification systems like the United Nations Standard Products and Services Code (UNSPC) and the Harmonized System (HS) are crucial for efficient trade finance transactions. Credit and foreign investment insurers, such as ICIEC, need to stay updated on these taxonomies and any revisions to ensure seamless integration with their processes.
- Regulatory Shifts: Regulatory frameworks for trade finance are constantly evolving. ICIEC needs to monitor changes in areas like anti-money laundering (AML), countering the financing of terrorism (CFT) and know-your-customer (KYC) regulations (now also called customer due diligence (CDD), sanctions lists, and environmental, social, and governance (ESG) considerations and disclosures. This allows for proactive risk mitigation and ensures compliance with evolving legal requirements. Failing to comply with such requirements, may cause reputational risk, and or losing the confidence of its partners such as reinsurance to provide the muchneeded reinsurance support required by any insurance company.
2.Sector-Specific Challenges – Tailoring Solutions for Diverse Needs
- Emerging Sectors: The rise of new sectors like renewable energy, fintech, and e-commerce presents both opportunities and challenges. ICIEC needs to develop expertise in these sectors to assess risks accurately and offer tailored insurance products.
- Traditional Sectors: : Established sectors like manufacturing and agriculture also face challenges due to factors like climate change and global competition. ICIEC can provide targeted solutions such as supply chain disruption coverage (due to commercial and noncommercial risks) for these sectors.
Emerging Sectors and Associated Risks – ICIEC Solutions
| Sector | Potential Risks | Insurance Solutions |
|---|---|---|
| Renewable Energy | Project delays, failure of project employer to honor their financial obligations | Political risk insurance (PRI) and Non-Honoring of Financial Obligations (NHSO) |
| Fintech | Non-honor their financial obligations | Political risk insurance (PRI) and Non-Honoring of Financial Obligation (NHSO) |
| E-commerce | Fraudulent transactions, logistics disruptions | Payment protection insurance, supply chain disruption coverage via credit, PRI, and NHSO covers |
3. Trade Digitization – Embracing the Technological Wave
The digitalization of trade finance is transforming how business is conducted. ICIEC as with other credit and foreign investment insurers needs to embrace these advancements to stay competitive:
- Trade Finance Platforms: On-line platforms like Marco Polo and we.trade are facilitating faster and more secure trade transactions. ICIEC shall enhance its online platform to offer real-time risk assessment and automated policy issuance.
- Big Data and Analytics:Leveraging big data and advanced analytics allows insurers, like ICIEC, to gain deeper insights into risk profiles, develop dynamic pricing models, and identify emerging trends.
4.The New ISO 20022 Standard – Streamlining Communication
The ISO 20022 standard enables more efficient and reliable exchange of information between parties involved in trade transactions, reducing processing times and errors associated with manual data entry and reconciliation.
Moreover, the standardization of messaging formats facilitates straightthrough processing (STP) of transactions, leading to cost savings and improved customer experience.
By adopting the noted standard, ICIEC can enhance their partnership with other stakeholders in the trade ecosystem, such as banks, corporates, and regulatory authorities which requires:
- System Upgrades: ICIEC needs to upgrade its system to be compatible with the new standard for seamless data exchange with banks, customs authorities, and other stakeholders.
- Training and Awareness: Training staff on the new standard and its implications for workflow adjustments is crucial for a smooth transition.
ICIEC Strategies for a Dynamic Future
ICIEC, as part of the IsDB Group, is well-positioned to adapt to the changing environment. Its focus on supporting trade within the member states of the OIC aligns with the increasing importance of South-South trade. By incorporating the strategies outlined above, ICIEC can continue to play a vital role in promoting economic development for its member countries by facilitating trade flows and supporting foreign direct investments.
ICIEC can navigate the evolving landscape by adopting the following strategies:
- Strategic Partnerships: Collaborating with trade finance platforms, banks, and other stakeholders can facilitate knowledge sharing and foster the development of innovative solutions.
- Flexibility and Agility: The ability to adapt quickly to changing circumstances is critical. We need to develop agile business models that can accommodate new technologies, regulations, and industry trends.
- Data-Driven Decision Making: Leveraging big data and analytics empowers us to make informed decisions about risk assessment, product development, and resource allocation.
- Continuous Learning: Establishing a culture of continuous learning allows ICIEC to stay updated on the latest developments in the industry. This can involve attending industry conferences, collaborating with academic institutions, and subscribing to relevant publications.
